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    Choosing Bond Options

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    You can buy a $50 savings bond today for $25 and redeem the bond in 10 years for its full face value of $50. You could also put your money in a money market account that pays 7% interest per year. Which option is better, assuming they are of equal risk?

    a. The money market account is better because it pays more interest.
    b. The money market account is better because it requires a smaller investment.
    c. The savings bond is better because it earns a higher interest rate.
    d. The money market and savings bond both earn 7% interest, so they are equal in value.

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    Solution Summary

    This solution discusses bond options.